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Saturday, July 25, 2009

How much should you spend on construction marketing -- and where? (2)

In my last posting, I answered the first part of the question with a one-size-fits-all answer, suggesting the percentage of resources for marketing (and sales) should be 5 to 25 per cent of your projected sales.

Of course, this is a wide range -- because the allocation depends on your business. Your most important concern should occur if your marketing allocations are above and below this range: If it is above, I can't see how your business can be sustainable unless you are ripping off your current clients, and if it is below, I can't see how you can retain any meaningful future business.

The next part of the question, "Where?" suggests a hierarchy of answers, as well. Usually, you will be in the higher range if you need to hire or contract with a direct sales force. Sales representatives, of course, need to eat, and good ones need to be paid well. The issue of whether to pay representatives salary of commission is complex and consistently debated -- but my experience is sales reps who forgo a portion of their commission for better marketing are usually much happier, if the marketing provides actionable leads which they are confident will convert.

(The volume of quality leads is probably the best metric of your marketing success. Softer indicators like "branding" and "top of mind awareness" are used to justify expense, but when it comes to brass knuckles business, good, convertible leads, are what count the most.)

In essence, you want to allocate your marketing resources so that you achieve the highest quality leads at the lowest possible cost -- while retaining your current clients, of course.

Here is my ranking order of the cheapest and best sources of leads:

1. "Free" word-of-mouth referrals and repeat clients
Obviously the highest and best source of leads, if you don't simply "rely" on this source. Usually good referral and repeat volume indicates you are doing your work well, and ensuring clients are satisfied. Skimping on the quality of your work to enhance your profits (or external marketing budget) is usually not such a good idea. But the problem with this source of leads is that it can be fickle in hard times. You don't control the process. You are "marketing" by chance.

2. Positive media publicity
Attention to you and your business and referrals by endorsement through news media (newspapers, radio, television) and relevant social networking and rating sites can be highly powerful -- of course this is only free if you receive it without spending any money on advertising or public relations consulting. The problem, of course, is again control -- you simply can't tell the media when to promote you, and you can encounter negative publicity. (Our business offers a service to generate positive editorial publicity, which is free if you have the scale of business to induce co-operation from your suppliers.)

3. Your website and/or blog
You can have your website designed effectively for $500 or less, and produce a blog for free. With time and effort, you can then achieve high Google search engine rankings, and when you reach first place on Google within relevant keywords, the "free" leads will start flowing. This solution often requires patience and can be difficult to achieve in highly competitive markets -- and Search Engine Optimization (SEO) scammers out there will promise you gold when they deliver nothing. But you can often pull it off.

4. Associations, community groups, and networking organizations

You may have to pay some dues, or (in some cases) make in-kind contributions, but the right associations can pay dividends far greater than their costs, especially if you can connect with other members and find the sweet spot of personal relationships within the group.

These four marketing approaches should not require more than five percent of your total budget, so they are virtually "must dos" for any construction business.

When you go beyond these initiatives, you enter the space of hiring or contracting with sales representatives, using print or paid electronic advertising, establishing significant paid referral programs, participating in trade or home shows, paying for keyword advertising or the Yellow Pages, or other marketing approaches.

Each of these approaches costs money, and often takes time to succeed. The individual approach you elect will depend on your business so I cannot suggest one-size answers here (but you can call or email me if you would like more personalized recommendations.)

Generally, I advocate you should:

  • Avoid commercial leads services, but you could work with local and competent referral leads providers if you know them (usually these operate on a personal level, within your community.)
  • Avoid businesses or services which bother you with in-bound telemarketing or spam (usually their marketing costs are way too high to deliver real value.)
  • When your marketing can be "in kind" or requires your sweat/time equity rather than cash, you should give it priority, especially if cash is short. This is especially relevant if you want to get closer to your current and potential clients;
  • Listen to your current clients to find what they like and respect;
  • Use your trade associations to speak with successful marketers in non-competitive but similar markets;
  • Use Internet forums (such as to gather ideas and bounce off your thoughts. Don't worry about "secrecy" -- your bright ideas are generally not unique or original, and if they really are, few will rush to copy them right away, anyways.
  • You should be able to put these ideas into a simple plan; not requiring more than a page/spreadsheet where you project your expenses and set up tracking columns for leads and business. This doesn't need to be overly sophisticated. You just want to be able to measure your results.
Add up your costs, figure out our revenue, and determine the best way to build a marketing strategy within your budget. The go for it.

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